SECURITIES AND EXCHANGE COMMISSION
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Pursuant to Section 13 or 15(d)
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Date of Report (Date of earliest event reported): November 19, 2020 (
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|Item 1.01.|| |
Entry into a Material Definitive Agreement.
On November 18, 2020, Nasdaq, Inc. (“Nasdaq”) entered into a share purchase agreement (the “Purchase Agreement”) with Osprey Acquisition Corporation, a wholly owned subsidiary of Nasdaq (“Buyer”), Verafin Holdings Inc. (“Verafin”), certain shareholders of Verafin (the “Sellers”), and Shareholder Representative Services LLC, solely in its capacity as the representative of the Sellers.
Pursuant to the Purchase Agreement, Buyer shall purchase and acquire from the Sellers all of the outstanding common shares of Verafin for an aggregate purchase price of $2.75 billion (the “Acquisition”). The purchase price shall be adjusted upwards for any cash held by Verafin at the closing, downwards for any outstanding debt and unpaid transaction expenses of Verafin at the closing, and upwards or downwards based on the level of net working capital at closing relative to a target level of net working capital. All Verafin options that are issued and outstanding will be accelerated immediately prior to the closing and holders thereof will be entitled to surrender their options in exchange for the right to receive an amount by which the per share consideration exceeds the exercise price of the options; any such payment for options will be paid out of the aggregate purchase price.
The closing of the Acquisition is subject to the satisfaction or waiver of certain conditions set forth in the Purchase Agreement, including (i) receipt of approval under the Investment Canada Act and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) there being no law or order prohibiting the Acquisition, (iii) the accuracy of each party’s representations and warranties, generally subject to materiality and material adverse effect qualifications, (iv) each party’s compliance, in all material respects, with their respective covenants and agreements, and (v) in the case of Nasdaq’s obligation to close, the completion of certain pre-closing reorganization steps by Verafin.
Subject to certain limited exceptions, certain Sellers of Verafin shall be prohibited from (i) engaging in specified competing business for five years following the closing and (ii) soliciting or hiring certain employees of Verafin or Nasdaq or any of their subsidiaries for three years following the closing.
The Purchase Agreement contains customary representations, warranties and covenants relating to the operation of Verafin’s business and certain activities of the Sellers prior to the closing, as well as covenants to use efforts to obtain the requisite regulatory approvals. The representations and warranties in the Purchase Agreement will not survive the closing, and the Company has arranged a representation and warranty insurance policy.
The Purchase Agreement may be terminated under the following circumstances: (i) by the mutual consent of Nasdaq, Verafin and the Sellers, (ii) by either Nasdaq or Verafin, if the Acquisition has not closed within nine months following the date of the Purchase Agreement, which deadline may be extended twice for up to thirty days in each case if all closing conditions other than the receipt of required regulatory approvals for the Acquisition have been obtained, (iii) by either Nasdaq or Verafin, if the other party breaches its representations or fails to perform its covenants such that the conditions to closing fail to be satisfied (subject to a cure period), and (iv) by either Nasdaq or Verafin, if there is a final and nonappealable order prohibiting the closing of the Acquisition.
|Item 7.01.|| |
Regulation FD Disclosure
On November 19, 2020, Nasdaq posted a presentation relating to the Acquisition on the investor relations section of its website at http://ir.nasdaq.com/. The presentation includes information not previously made publicly available and will be used in connection with meetings with investors, analysts and other parties from time to time and for general marketing purposes.
The information set forth under this Item 7.01 Regulation FD Disclosure is intended to be furnished pursuant to Item 7.01. Such information shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any of Nasdaq’s filings under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
|Item 8.01.|| |
Escrow and Management Incentive Agreement
On November 18, 2020, concurrently with its entry into the Purchase Agreement, Nasdaq entered into an escrow and management incentive agreement with Buyer, Verafin, and certain senior employees of Verafin pursuant to which:
each such employee has agreed to place in escrow, at the closing of the Acquisition, fifteen percent of the after-tax consideration received by such employees in the Acquisition, with such amount to be released to the employee in equal installments on the first three anniversaries of the closing of the Acquisition if such employee continues to be employed with Verafin or its subsidiaries (unless certain acceleration or vesting events occur as set forth in the agreement), and
Buyer will establish a cash management incentive plan pursuant to which each such employee shall have an opportunity to receive a grant that would entitle such employee to a portion of the increase in the valuation of Verafin (based on a predetermined formula) above the price paid in the Acquisition if such employee continues to be employed with Verafin or its subsidiaries at the third anniversary of the closing of the Acquisition (unless certain acceleration or vesting events occur as set forth in the agreement).
Bridge Facility Commitment Letter
In connection with the Purchase Agreement, Nasdaq entered into a commitment letter, dated November 18, 2020, among Nasdaq, JPMorgan Chase Bank, N.A. (“JPMCB”), Bank of America, N.A. (“Bank of America”), BofA Securities, Inc. (together with its designated affiliates, “BofA Securities”), Goldman Sachs Bank USA (“GS Bank”) and Morgan Stanley Bank, N.A. (“Morgan Stanley”, and together with JPMCB, Bank of America, BofA Securities and GS Bank, the “Commitment Parties”), pursuant to which certain of the Commitment Parties have agreed to provide, subject to the satisfaction of customary closing conditions, up to $2.5 billion of senior bridge term loans for the purpose of financing all or a portion of the consideration payable by Nasdaq pursuant to the Purchase Agreement.
On November 19, 2020, Nasdaq issued a press release announcing the Acquisition. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
|Item 9.01.|| |
Financial Statements and Exhibits.
The following exhibits are filed as part of this Current Report on Form 8-K:
|99.1||Nasdaq, Inc. Press Release, dated November 19, 2020.|
|104||Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Dated: November 19, 2020||NASDAQ, INC.|
|Name:||John A. Zecca|
|Title:||Executive Vice President and Chief Legal Officer|
Nasdaq to Acquire Verafin, Creating a Global Leader in the Fight Against Financial Crime
Accelerates Nasdaqs ongoing evolution into a leading SaaS technology provider.
Combines Nasdaqs global reach and established regulatory technology leadership with
Verafins innovative anti-money laundering and fraud platform and client breadth.
Enhances Nasdaqs performance and potential, with Verafins cloud products delivering ~30% compound
annual recurring revenue growth, or ARR1, within a US$13 billion addressable market.
Strengthens Verafin as a center of innovation and technology within the province of Newfoundland and
Labrador and an economic leader in St. Johns.
NEW YORK, ST. JOHNS, Nov. 19, 2020 (GLOBE NEWSWIRE) Nasdaq, Inc. (Nasdaq: NDAQ), a global technology company, and Verafin, an industry pioneer in anti-financial crime management solutions, today announced that they have entered into a definitive agreement for Nasdaq to acquire Verafin for US$2.75 billion in cash, subject to customary adjustments. The agreement will combine Verafins comprehensive suite of anti-financial crime management products with Nasdaqs reach and established regulatory technology leadership to create a global SaaS leader in the fight against financial crime, a worldwide problem that demands innovative action.
Based in St. Johns, Newfoundland and Labrador and founded in 2003, Verafin provides more than 2,000 financial institutions in North America a cloud-based platform to help detect, investigate, and report money laundering and financial fraud. Verafins products are powered by intelligent analytics and leverage machine learning, robust shared data insights and powerful visualization and investigation tools to increase detection accuracy and reduce costs for clients. Verafin emphasizes a holistic approach to eradicating financial crime and its platform supports a consortium of several of the largest global banks as they collaborate to detect financial crimes to support law enforcement investigations.
The acquisition strengthens Nasdaqs existing regulatory technology and anti-financial crime solutions, which include its renowned Nasdaq Trade and Market Surveillance offering, its Buy-side Compliance product, as well as the Nasdaq Automated Investigator for anti-money laundering (AML). Verafins capabilities will be available to the global network of nearly 250 banks, exchanges, broker-dealers and buy-side organizations, and regulatory authorities that rely on Nasdaqs technology to detect market manipulation and abuse today. Nasdaq believes that its deep relationships with the majority of leading Tier 1 and Tier 2 banks globally will accelerate Verafins strategy of displacing legacy providers and manual processes with its cloud-based, state-of-the-art, market-proven solution.
At the core of Nasdaqs mission, we champion fairness and integrity in the markets that we build and in the broader financial ecosystem in which we operate, and combatting financial crime is central to achieving our goals. Verafins innovative fraud and AML detection platform, combined with Nasdaqs
ARR for a given period is the annualized revenue of active contracts. ARR does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by customers.
leading trade and market surveillance solution, will empower Nasdaq to play an increasingly important role in building stronger economies around the world, said Adena Friedman, President and Chief Executive Officer, Nasdaq. The intelligent technology solutions Verafin has created are second-to-none, and that is evident in the companys extraordinary growth and stellar client retention. Together with Verafins founders and employees, we look forward to building Nasdaq into a global leader in anti-financial crime management solutions. Additionally, we are committed to supporting innovation and growth in St. Johns and Newfoundland and Labrador. We believe that Verafin will not only complement and grow our existing presence in Canada, but also represents a potential catalyst for further investment opportunities in the province and the country.
Friedman continued, In addition to Verafins significant contribution to Nasdaqs strategic ambitions, the acquisition also furthers our goal to be a premier provider of cloud-based SaaS solutions to the global capital markets and beyond. This combination meaningfully accelerates the evolution of our business mix toward highly scalable, subscription revenue.
Anti-financial crime technology represents a large and growing sector with structural and regulatory tailwinds. Financial institutions face significant challenges in detecting and preventing financial crime, and therefore invest significant capital and resources in combatting an ever-increasing threat to the integrity of the global financial system. Up to US$2 trillion in laundered money flows through the financial system annually according to the United Nations, and criminals continue to find sophisticated methods for moving funds undetected. Automation and vendor solutions, a US$13 billion market according to Oliver Wyman, have become increasingly attractive solutions for financial institutions.
This investment by Nasdaq, a global leader in financial technology, is a major vote of confidence and a significant win for the Province of Newfoundland and Labradors technology and innovation sector. Nasdaqs clear commitments to the Province will help foster prosperity and opportunity throughout the community as we continue to grow our business, said Jamie King, Chief Executive Officer, Verafin. Since we began discussions with Nasdaq, we felt their DNA strongly mirrored our own core values: innovation, teamwork, entrepreneurship, and a commitment to continued growth and development. Together with Nasdaq, we will be a clear leader in expanding the fight against illicit finance by delivering our capabilities to a global client base from our headquarters in St. Johns.
Nasdaqs Investment in St. Johns, Newfoundland and Labrador and Canada
Nasdaq is committed to growing Verafins business and creating opportunities for their employees. Nasdaqs investment will help Verafin expand its position as an economic and technology leader from its base in St. Johns and within the province of Newfoundland and Labrador.
To this end, Nasdaq will make the following commitments:
Verafins headquarters will proudly remain in St. Johns and its executive leadership team will remain in place and continue to lead the companys growth.
Nasdaq highly values the skills and expertise of Verafin employees and will invest to both maintain and increase local employment levels to fuel Verafins growth.
In order to foster the next generation of talent in the province and help support Verafins growing employment base, Nasdaq will work closely with Memorial University to grow its scholarship program at the University, enhance its co-op programs, and fund and supervise at least six Mitacs fellowships annually for Masters and PhD students.
Nasdaq sees great potential in the innovation ecosystem of St. Johns and will increase investment in Verafins research and development. This will include an investment in a new US$1 million R&D partnership project with The Genesis Centre, Newfoundland and Labradors pre-eminent innovation hub.
In addition, Nasdaq admires the extensive charitable and community support that Verafin has provided to date and will increase Verafins level of charitable giving as the company continues to grow.
Financial Impact and Value Creation
The transaction meets all of Nasdaqs acquisition investment criteria:
Verafin is a strong strategic and cultural fit, accelerating Nasdaqs evolution into a technology, analytics and infrastructure provider. The transaction is expected to increase revenue contribution from the highest-growth Market Technology and Investment Intelligence segment to 47% (from 45%) of total Nasdaq net revenue2 pro forma for the third quarter of 2020.
It is expected to enhance Nasdaqs performance and valuation potential, in particular by accelerating organic revenue3 growth outlook within its Solutions Segments to 6-9% (from 5-7% previously).
The acquisition of Verafin is expected to deliver EPS accretion beginning in 2022 and meet Nasdaqs ROIC, or return on invested capital, and IRR objectives.
Verafin has grown at a compound annual revenue growth rate of approximately 30% over the last three years. Verafin expects to deliver in excess of US$140 million4 in revenue in 2021, representing an implied multiple of approximately 19.5x revenue, in line with high-growth SaaS companies.
Verafins results will be reported within Nasdaqs Market Technology segment. As a result, Nasdaq is raising its Market Technology segments medium-term organic revenue annualized growth outlook to 13-16% (from 8-11% previously). The acquisition of Verafin is also expected to accelerate Market Technologys projected timing of meeting the rule of 405 threshold to 2023, two years ahead of Market Technologys 2025 target.
Financing and Approvals
Nasdaq intends to finance the transaction with a combination of US$2.5 billion of debt and cash on hand and expects debt / non-GAAP EBITDA leverage to be approximately 3.9x pro forma for the transaction. Nasdaq intends to pursue its existing capital deployment plan, including dividend payments and share repurchases, consistent with past practice, and expects to de-lever over time to return to a leverage ratio consistent with its current investment grade ratings.
Represents revenues less transaction-based expenses.
Refer to the non-GAAP information section of this release for a discussion of this and other non-GAAP measures.
Excludes the impact of purchase accounting write-down on deferred revenue.
Represents non-GAAP EBITDA margin percentage plus annual growth rate.
The transaction is subject to regulatory approvals and other customary closing conditions. Spectrum Equity, a leading growth equity investor based in Boston and San Francisco, and Information Venture Partners, a leading FinTech-focused venture capital firm based in Toronto, both significant investors in Verafin, have agreed to sell their stake as part of this transaction. It is expected to close in the first quarter of 2021.
Evercore served as lead financial advisor to Nasdaq, along with J.P. Morgan Securities LLC. Nasdaq also received financial advice from BofA Securities, Goldman Sachs & Co. LLC, Morgan Stanley and TD Securities. Wachtell, Lipton, Rosen & Katz and Blake, Cassels & Graydon LLP served as legal advisors to Nasdaq.
William Blair & Company acted as financial advisor to Verafin in connection with the transaction. Osler, Hoskin & Harcourt LLP acted as Verafins legal advisor.
Conference Call / Webcast
On Thursday, November 19, 2020 at 8:00 a.m. ET, Nasdaq will host a webcast presentation to discuss the transaction. Links to the webcast and accompanying documents will be available at the companys Investor Relations website, http://ir.nasdaq.com/investor-relations.
Nasdaq (Nasdaq: NDAQ) is a global technology company serving the capital markets and other industries. Our diverse offering of data, analytics, software and services enables clients to optimize and execute their business vision with confidence. To learn more about the company, technology solutions and career opportunities, visit us on LinkedIn, on Twitter @Nasdaq, or at www.nasdaq.com.
Verafin is the industry leader in enterprise Financial Crime Management solutions, providing a cloud-based, secure software platform for Fraud Detection and Management, BSA/AML Compliance and Management, High-Risk Customer Management and Information Sharing. Over 2,000 banks and credit unions use Verafin to effectively fight financial crime and comply with regulations. Leveraging its unique big data intelligence, visual storytelling and collaborative investigation capabilities, Verafin significantly reduces false positive alerts, delivers context-rich insights and streamlines the daunting BSA/AML compliance processes that financial institutions face today. Verafin is the exclusive provider for Texas Bankers Association, Western Bankers Association, Florida Bankers Association, Massachusetts Bankers Association, and CUNA Strategic Services, with industry endorsements in 48 U.S. states. Visit www.verafin.com, email firstname.lastname@example.org or call 866.781.8433.
Nasdaq Investor Contact
Ed Ditmire, CFA: +1 212 401 8737
Nasdaq Media Contacts
Ryan Wells: +1 646 648 3887
Yan-yan Tong: +46 (0)73 449 66 83
Longview Communications & Public Affairs (Canada)
Ian Hamilton: +1 905 399 6591
Andy Lloyd: +1 416 402 5029
Verafin Media Contact
Brian Hartlen: +1 709 725 8235
This communication contains forward-looking information related to Nasdaq, Verafin and the proposed acquisition of Verafin by Nasdaq that involves substantial risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed or implied by such statements. When used in this communication, words such as intends, plans, will, believes, expected, projected and similar expressions and any other statements that are not historical facts are intended to identify forward-looking statements. Forward-looking statements in this communication include, among other things, statements about the potential benefits of the proposed transaction, Nasdaqs plans, objectives, expectations and intentions, the financial condition, results of operations and business of Nasdaq or Verafin, and the anticipated timing of closing of the proposed transaction. Risks and uncertainties include, among other things, risks related to the ability of Nasdaq to consummate the proposed transaction on a timely basis or at all; Nasdaqs ability to secure regulatory approvals on the terms expected, in a timely manner or at all; Nasdaqs ability to successfully integrate Verafins operations; Nasdaqs ability to implement its plans, forecasts and other expectations with respect to Verafins business after the completion of the transaction and realize expected synergies; the ability to realize the anticipated benefits of the proposed transaction, including the possibility that the expected benefits from the proposed transaction will not be realized or will not be realized within the expected time period; the impact of Verafins business model on Nasdaqs ability to forecast revenue results; disruption from the transaction making it more difficult to maintain business and operational relationships; risks related to diverting managements attention from Nasdaqs ongoing business operations; the negative effects of the announcement or the consummation of the proposed transaction on the market price of Nasdaqs common stock or on Nasdaqs operating results; significant transaction costs; unknown liabilities; the risk of litigation or regulatory actions related to the proposed transaction; future levels of Nasdaqs indebtedness, including additional indebtedness that may be incurred in connection with the proposed transaction; and the effect of the announcement or pendency of the transaction on Verafins business relationships, operating results, and business generally.
Further information on these and other risks and uncertainties relating to Nasdaq can be found in its reports filed on Forms 10-K, 10-Q and 8-K and in other filings Nasdaq makes with the SEC from time to time and available at www.sec.gov. These documents are also available under the Investor Relations section of Nasdaq s website at http://ir.nasdaq.com/investor-relations. The forward-looking statements included in this communication are made only as of the date hereof. Nasdaq and Verafin disclaim any obligation to update these forward-looking statements, except as required by law.
This press release includes certain non-GAAP financial measures, including organic revenue growth, non-GAAP EBITDA and ROIC.
Nasdaq and Verafin believe that these non-GAAP measures provide useful information to management and investors regarding certain financial and business trends relating to Verafins financial condition and results of operations. Nasdaqs and Verafins managements use certain of these non-GAAP measures to compare Nasdaqs and Verafins performance to that of prior periods for trend analyses and for budgeting and planning purposes. Nasdaq and Verafin believe presentation of these measures provides investors with greater transparency and supplemental data relating to financial condition and results of operations.
Nasdaqs organic growth calculation methodology normally excludes acquired businesses from the measure until they have been part of Nasdaq for a full 12-month period. For purposes of providing the pro-forma impact of the Verafin acquisition, Verafins forecasted results are included and the impact of purchase accounting write-down on deferred revenue is excluded in these measures.
These measures are not in accordance with, or an alternative to, U.S. GAAP, and may be different from non-GAAP measures used by other companies. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces its usefulness as a comparative measure. Investors should not rely on any single financial measure when evaluating these businesses. This information should be considered as supplemental in nature and is not meant as a substitute for operating results in accordance with U.S. GAAP.
A reconciliation of non-GAAP forward looking information to their corresponding GAAP measures cannot be provided without unreasonable efforts due to the inherent difficulty in quantifying certain amounts due to a variety of factors, including the unpredictability in the movement in foreign currency rates, Nasdaqs effective tax rate as well as future charges or reversals outside of the normal course of business.